Volatility, Black Mondays, and Keeping Your Cool Special Update – August 26, 2015

Image courtesy of FreeDigitalPhotos.net/cuteimage

Image courtesy of
FreeDigitalPhotos.net/cuteimage

Stock markets around the world have been in tumult for days. Last week, stock markets around the world plummeted on fresh fears about how a slowing Chinese economy might affect the global economic outlook. Stocks remained volatile on Monday and Tuesday, falling further before regaining ground, and then reversing to end Tuesday in the red again.

What’s behind recent market movements? A few things:

  • Stocks have been trading near historic highs for months. A pullback was all but guaranteed and is a very normal part of market cycles. What gave investors a fright was the speed at which the pullback occurred.
  • Emotion is in the driver’s seat. The opposing emotions of fear and greed are putting stocks all over the map. Savvy investors are watching and waiting for opportunities to snap up bargains.
  • Fears about China are probably overrated. Slumping exports, currency devaluations, and shrinking smartphone sales have triggered dire warnings about the state of the Chinese economy. Let’s put China in perspective: Exports to China are worth 0.7% of U.S. GDP. Even if China slips into a recession, it may not be the end of the world. Some U.S. companies that sell a lot of goods in China may feel the pinch, but most of U.S. growth is driven by what we consume at home.

 How long will the correction last? No one knows for sure, but it’s probably not a repeat of 2008 again. The financial crisis was driven by fundamental factors like a housing market crash and the ensuing mortgage meltdown. We can say that fundamentals for U.S. stocks remain positive. Here’s what we’re looking at:

 Keep Calm and Carry On

Now, all of this is to say: keep cool, keep calm, and focus on your own goals. While it’s stressful to see portfolio values swing so wildly, the data behind the recent volatility doesn’t indicate any fundamental reasons to worry. Go outside, take a walk, play some golf. We’re keeping a very close eye on what’s happening in markets and will be in touch as conditions warrant.

4 Things You Shouldn’t Do Right Now Weekly Update – August 24, 2015

Image courtesy of FreeDigitalPhotos.net/Stuart Miles

Image courtesy of FreeDigitalPhotos.net/Stuart Miles

U.S. stocks ended a defensive week in the red as investor sentiment deteriorated in the face of fresh worries out of China. For the week, the S&P 500 fell 5.77%, the Dow lost 5.82%, and the NASDAQ slid 6.78%.

When markets take a dive, it’s natural to worry about what’s happening and where markets will go next. However, part of being a stock investor is taking market swings in stride. Now is the time to stay cool-headed and focused on your long-term goals. On that note, here are 4 things that you definitely should not do after last week’s market pullback:

Don’t listen to the talking heads. The selloff is happening in the middle of a seven-year bull market. As of Friday, the S&P 500 has gone 1,418 calendar days without a 10%+ drop (between 10/3/11 and 8/21/15).[i]

Regardless of what the media is saying, the S&P 500 is down just 7.51% since its peak in mid-May. Markets experienced a similar selloff in September and October of last year. However, the talking heads have taken this widely anticipated pullback and made it sound like 2008 all over again. Remember – the media’s goals are not aligned with yours. They want to keep viewers glued to their televisions and newspapers, waiting for the sky to fall. Out in the real world, we’re taking a look at the numbers behind the selloff and making prudent adjustments where we feel it’s necessary.

Don’t panic and hit the eject button. Corrections are a normal part of market cycles. Since 1927, the S&P 500 has experienced pullbacks of 5% or more about every 3.5 months. While the past can’t predict the future, research shows that panicking and exiting the market is often the worst thing you can do when markets swing. Investors are notoriously terrible at picking market tops and bottoms; since periods of high growth often occur during turbulent times, investors who sell off and sit on the sidelines frequently miss out on the good days.

For example, an investor who stayed fully invested in the S&P 500 between 1995 and 2014 would have experienced a 9.8% annualized return. However, if they had traded in and out of the market, missing just the 10 best days of the market, their return would have plummeted to just 6.1%. Six of the 10 best days of the S&P 500 fell within two weeks of the 10 worst days.

Don’t think like a day trader instead of an investor. Stock markets are driven by fear and greed. Right now, traders are in full-on fear mode and are selling off indiscriminately at any hint of bad news. Long-term investors are taking a look around and seeing what opportunities the pullback is offering.

Don’t get complacent. Pullbacks offer you the chance to ask yourself if you’re honestly prepared for a correction. If you can sleep well at night knowing that you have a prudent strategy and a well-diversified portfolio, then you’re better prepared for a potential correction. We don’t know whether the current selloff is a short-term blip that will reverse in a few days or the beginning of a deeper slide. However, domestic indicators are trending positively, and we believe that there is room for a resurgence.

We are keeping a very close eye on markets worldwide and will update you as needed during the evolving situation. While we can’t predict where markets will go in the next days and weeks, we specialize in helping clients protect and grow their wealth in many market environments.

ECONOMIC CALENDAR:

Tuesday: S&P Case-Shiller HPI, New Home Sales, Consumer Confidence

Wednesday: Durable Goods Orders, EIA Petroleum Status Report

Thursday: GDP, Jobless Claims, Pending Home Sales Index

Friday: Personal Income and Outlays, Consumer Sentiment

8242015

HEADLINES:

Weekly jobless claims rise more than expected. The number of Americans filing new claims for unemployment benefits rose more than projected last week, though the underlying trend is consistent with continued labor market improvement and the previous week’s claims were revised downward.

Housing starts boom. Groundbreaking on new homes rose in July to the highest level in nearly eight years. Builders ramped up activity on single-family homes, indicating that they expected significant demand later this year.

Inflation rises steadily. A measure of inflation, the general increase in the cost of goods and services, rose slightly in July, supporting expectations of an interest rate hike this year.

Existing home sales rocket to eight-year high. Resales of U.S. homes increased more than expected in July, rising 2.0%, and indicating that the housing market has legs.

[i] Source: Mike Higley, By The Numbers (8/17/15)

 

 

Stocks Gain on Greek Deal & Data Weekly Update – August 17, 2015

Image courtesy of FreeDigitalPhotos.net/renjith krishnan

Image courtesy of
FreeDigitalPhotos.net/renjith krishnan

Despite significant volatility, stocks ended last week higher after a finalized Greek bailout deal and some upbeat domestic economic data. For the week, the S&P 500 gained 0.67%, the Dow grew 0.60%, and the NASDAQ added 0.09%.

Greece finally clinched a third bailout from creditors when its parliament approved the deal and Germany backed off its opposition to the terms. The deal isn’t perfect and the International Monetary Fund is refusing to participate until there is an agreement on debt relief from Greece’s Eurozone creditors. However, U.S. investors greeted the news that Greece will remain in the monetary union with a sigh of relief. Is the Greek drama finally over? Probably not for long.

China added significant uncertainty last week when the Chinese government unexpectedly devalued the yuan against the dollar by the largest amount in two decades. While China claims that the move isn’t designed to lower export prices and boost demand, the move came after a series of depressing export reports that suggest China’s economy is in trouble. At any rate, China has been under immense pressure to devalue its currency as part of market reforms. Investors are worried that a currency war could put pressure on the dollar and hurt U.S. manufacturers.

Despite panicky media headlines that claimed that the sky is falling, the devaluation really isn’t a big deal. Here’s why:

The Chinese yuan dropped about 3.5% against the dollar in the past year. However, the Euro is down 16.4%, the Canadian dollar is down 15.8%, and the Japanese yen is down 17.0%. All told, the U.S. dollar has gained significant ground against the currencies of most of our trading partners. A stronger U.S. dollar means that Americans can afford to buy more foreign products. As First Trust’s chief economist says, “The idea that the Chinese devaluation is going to send ripples of catastrophe across the world is nothing more than a Chicken Little story.”

A cheaper yuan is like a sale on Chinese goods. Right now, the Chinese economy is showing weakness, and a cheaper currency will hopefully help stoke growth in the world’s second-largest economy. If the move is successful in boosting growth, it will be a big help to the global economy. A more expensive dollar relative to the yuan means that Chinese consumers might end up importing fewer U.S. goods (potentially causing some U.S. firms to suffer in the short term). However, if it’s a sign that China may be allowing the market (instead of its central bank) to set the value of its currency, it’s a net win for global consumers in the long term.

Looking at the week ahead, all eyes will be on China to see whether last week’s currency devaluation will continue. Analysts will also be digging through the official minutes from the latest Federal Reserve Open Market Committee meeting for more hints about how the Fed plans to handle potential threats to economic growth.

P.S. You may have seen Chinese currency called the yuan or the renminbi in media reports and wondered if there was a difference. They are essentially interchangeable terms. Renminbi (meaning “people’s currency” in Mandarin) is the formal term used by Chinese officials, while the yuan is the actual unit of the currency.

ECONOMIC CALENDAR:

Monday: Empire State Mfg. Survey, Housing Market Index, Treasury International Capital

Tuesday: Housing Starts

Wednesday: Consumer Price Index, EIA Petroleum Status Report, FOMC Minutes

Thursday: Jobless Claims, Philadelphia Fed Business Outlook Survey, Existing Home Sales

Friday: PMI Manufacturing Index Flash

817c

 

HEADLINES:

Consumer sentiment flags in August. Though American consumers don’t seem to be concerned about inflation or current economic conditions, the latest survey indicates some concerns about their future finances. Dips in consumer sentiment could translate into lower spending this quarter.

Nationwide home rental prices are sky high. The cost of renting a home has risen to record highs. A study found that renters can now expect to pay about 30% of their income in rent, as compared to the 15% buyers pay toward a mortgage. Hopefully, unaffordable rents will contribute to housing market activity.

Weekly jobless claims rise again. The number of Americans filing new claims for unemployment benefits rose unexpectedly last week. Though claims have risen for three straight weeks, they are still below the 300,000 mark and still support a strengthening job market.

Business inventories rise. U.S. businesses increased their stockpiles of goods by the most in two years, indicating that they expect demand to increase in the coming months. Analysts hope that a stronger job market will boost consumer spending.

Hixon Zuercher August 2015 Monthly Market Update

Stocks Fall on Oil Woes Weekly Update – August 10, 2015

Image courtesy of FreeDigitalPhotos.net/Vlado

Image courtesy of FreeDigitalPhotos.net/Vlado

Stocks gave in to gloom about low global oil prices and fell again last week, erasing the previous week’s gains. For the week, the S&P 500 lost 1.25%, the Dow fell 1.79%, and the NASDAQ dropped 1.65%.

Domestically, the data looks more positive. Friday’s July jobs report might have given the Federal Reserve the ammunition it needs to raise interest rates in September. The latest data shows that the economy added 215,000 new jobs last month, bringing the total for 2015 to 1.48 million so far. Unemployment held steady at 5.3% (very close to the Fed’s long-term average of 5.1%) and wages edged up 0.2%. Combined with growth in the total number of hours worked, workers’ total cash earnings are up 4.8% from a year ago, giving American workers more money to spend.

Last month was also the 65th month in a row with growth in private (non-government) payrolls, marking the longest jobs-growth streak since the 1930s. All told, the labor market continues to improve. While we’re not in the boom times of the 80s or 90s, our “Plow Horse economy” is moving ahead moderately, which may set the stage for a rate increase later this year.

In not-so-great news, Puerto Rico missed a municipal bond payment, marking a major setback for the U.S. territory, which has suffered from years of stagnant growth and rampant unemployment. Technically, Puerto Rico’s Finance Corporation. (PFC) has until this Tuesday to make its debt payment, but it’s not likely to make the deadline. Puerto Rico owes $73 billion in debt, much of it to investors in its municipal bonds.

While the default may spell financial disaster for the territory, long-term investors are unlikely to be affected. The default has been widely expected, and ratings agencies downgraded Puerto Rico’s debt into junk territory earlier this year. The default is also unlikely to affect the broader muni bond market since the situation in Puerto Rico is not representative of most municipal bond issuers. Improving credit conditions and broad economic growth across the country mean that investment-grade muni bonds may be an option for some investors as part of a well-diversified portfolio strategy.

Looking ahead, the week is light on economic data, though analysts will be looking for consumer sentiment and retail sales data for clues about the back-to-school shopping season. Back-to-school shopping is the second largest retail shopping event after the winter holidays and is an important barometer of overall consumer spending.

 ECONOMIC CALENDAR:

Tuesday: Productivity and Costs

Wednesday: JOLTS, EIA Petroleum Status Report, Treasury Budget

Thursday: Jobless Claims, Retail Sales, Import and Export Prices, Business

Inventories

Friday: PPI-FD, Industrial Production, Consumer Sentiment

81015

HEADLINES:

Low pump prices fuel vehicle sales. The July motor vehicle sales report shows that U.S. car manufacturers are reaping the benefits of low gas prices as consumers rush to buy SUVs and bigger vehicles. The industry is close to pre-recession sales numbers.

Oil prices reach multi-month lows. Though crude oil supplies fell, a jump in U.S. gasoline inventories sent global oil prices low again. If refineries continue to produce at capacity, gasoline stocks will remain high even after the peak driving season.

Factory orders rebound in June. Orders for manufactured goods jumped in June in a positive sign for the struggling sector. A strong dollar and weak energy prices had stalled manufacturing activity in May.

Consumer debt rises in June. Americans took on debt faster in June, suggesting that an improving labor market may be making them comfortable enough to open their wallets.

Stocks End Week Up Weekly Update – August 3, 2015

Courtesy of FreeDigitalPhotos.net/JSCreationzs

Courtesy of FreeDigitalPhotos.net/JSCreationzs

Stocks snapped their losing streak and regained steam last week despite some soft data, posting weekly and monthly gains. For the week, the S&P 500 gained 1.16%, the Dow rose 0.69%, and the NASDAQ grew 0.78%.

July was a volatile month, with a tug-of-war between overseas and domestic data and concerns about a Greek exit from the Eurozone. Despite all the downward pressure, stocks managed to record a respectable gain for the week.

Earnings season continued, and we have results from over 350 S&P 500 companies. So far, overall earnings were down 2.5% year-over-year on 4.4% lower revenues. The Energy sector is dragging on overall earnings growth because of low oil prices. Taking Energy companies out, analysts expect overall S&P 500 earnings to be up 5.4% year-over-year on 1.4% higher revenues.

Now that the overall earnings picture is firming up, analysts are turning their attention to third-quarter expectations. Unfortunately, it looks like U.S. companies are even more cautious about the rest of the year and earnings estimates for Q3 and Q4 are coming down across the board. The chart below shows that overall earnings growth is expected to be negative in the third and fourth quarters before picking up early next year.

83-1Will these estimates hold? It’s hard to say. Many corporate managers prefer to “under-promise and over-deliver” on estimates, artificially lowering them so as to be able to beat their own expectations. We’ll know more as the quarter progresses.

The Federal Reserve met again in July, and though no interest rate changes were announced, the central bank reiterated its intentions to raise rates this year – possibly as soon as September. Are higher rates already baked into stock and bond prices? We don’t know for certain, but the Fed has been telegraphing its rates play for months now, so we hope that markets won’t overreact when rates finally start to go up. Though we don’t know how quickly the Fed will start hiking up rates, we expect the process to be slow and gradual, giving the economy time to adapt.

We also got our first look at second quarter Gross Domestic Product, which showed that the economy grew at 2.3% in the second quarter. While economists had predicted higher growth, it’s still a vast improvement on the 0.6% growth the economy saw in the wintery first quarter.

The week ahead is packed with economic data, including motor vehicle sales, factory orders, and the July employment situation report. Analysts will be highlighting Friday’s July jobs report to see whether it supports or detracts from the Fed’s case for raising rates. If hiring remains strong and wage growth improves, the Fed may still be on target for a September rate hike. If wage growth is soft, it could push the timeline out.

ECONOMIC CALENDAR:

Monday: Motor Vehicle Sales, Personal Income and Outlays, PMI Manufacturing Index, ISM Mfg. Index, Construction Spending

Tuesday: Factory Orders

Wednesday: ADP Employment Report, International Trade, ISM Non-Mfg. Index, EIA Petroleum Status Report

Thursday: Jobless Claims

Friday: Employment Situation

83-2

HEADLINES:

Consumer sentiment drops in July. Two measures of how American consumers feel about their economic prospects dropped in July, partly because of concerns about economic growth as well as worries about Greece and China.

Big cities drive rental prices high. U.S. home rental prices rose much faster than incomes in June. Unsurprisingly, major cities like San Jose, San Francisco, and Denver experienced double-digit year-over-year increases as demand pushed rental prices higher.

Weekly jobless claims rise slightly. Though weekly claims for new unemployment benefits edged higher last week, the four-week average dipped lower, indicating that the labor market continues to improve.

Oil prices drop as producers keep pumping. Crude oil experienced its biggest monthly drop since 2008 on signs that Middle East producers were continuing to pump at record levels despite concerns about a supply glut.

Markets Drop on Global Growth Worries Weekly Update – July 27, 2015

Image courtesy of FreeDigitalPhotos.net/sscreations

Image courtesy of
FreeDigitalPhotos.net/sscreations

Stocks were unable to maintain the momentum and gave up ground in another roller coaster week. Though earnings week marched onward, investors seemed more concerned about global growth and falling commodity prices. For the week, the S&P 500 fell 2.20%, the Dow dropped 2.85%, and the NASDAQ lost 2.31%.[i]

Falling commodity prices contributed to a lot of last week’s selloff as investors worried that plummeting gold, copper, and silver prices meant slowing global economic demand. Commodity prices were hit hard by new data out of China that shows manufacturing activity is at a 15-month low. The Asian giant is the world’s largest consumer of industrial metals, and commodity traders worry that falling demand could lead to a glut in metal supplies.[ii]

Are fears about China overblown? Possibly. Between the recent stock selloff in China and fresh concerns about a hard landing for the Chinese economy, it might seem that the global bull market might be ending. However, let’s take a step back and take a look at the big picture. While the Chinese economy is the second largest in the world and could certainly disrupt global growth, the size (and structure) of its stock market means that volatility there isn’t likely to affect U.S. equities. In fact, Chinese stocks had already experienced two bear markets since 2009 – neither of which seriously affected our domestic bull market. China’s central bank is also taking an active role in boosting economic growth.[iii] All that being said, the past can’t predict the future, and we’re keeping a close eye on what’s happening overseas. While we do see some headwinds and potential threats on the horizon, we still believe in a globally diversified portfolio strategy.

On the domestic front, earnings season continued last week and the picture thus far is uninspiring. As of July 22nd, we have gotten results from 103 S&P 500 members and total earnings are up just 3.0% on 1.2% higher revenues than the same period last year. Fortunately, not everything is bleak. Multiple sectors have seen success stories, and overall earnings are being dragged down by the beleaguered Energy sector.[iv] Are these results unexpected? Not at all. Much of the weakness was anticipated, and analysts are hopeful that growth will pick up in 2016.[v] However, the tepid earnings picture leaves many investors wondering if the Federal Reserve will see enough growth this year to raise rates.

Attention will turn to the Fed’s Open Market Committee when it meets next week, and though we don’t expect any decisions about interest rates to be made, we hope that the Fed will give us some insight into what they think about recent global growth worries. Earnings season will continue, and we’ll also get another look at second quarter economic growth, which is expected to rise slightly.[vi]

ECONOMIC CALENDAR:

Monday: Durable Goods Orders, Dallas Fed Mfg. Survey

Tuesday: S&P Case-Shiller HPI, Consumer Confidence

Wednesday: Pending Home Sales Index, EIA Petroleum Status Report, FOMC Meeting Announcement

Thursday: GDP, Jobless Claims

Friday: Employment Cost Index, Chicago PMI, Consumer Sentiment

7-27-15

HEADLINES:

New home sales drop in June. Sales of newly built homes unexpectedly fell last month to the lowest level in seven months. Since data last week showed that new permits are up, analysts hope the setback is temporary.[vii]

Existing home sales skyrocket in June. Resales soared last month on pent-up demand to their highest level in nearly 8-1/2 years. Analysts hope that the housing market will keep its momentum ahead of possible interest rate increases.[viii]

Jobless claims drop to lowest level since 1973. The number of Americans filing new claims for jobless benefits plummeted last week to a multi-decade low, suggesting that hiring remains solid despite summer volatility.[ix]

Greek cash limits unlikely to go away soon. Greek banks will likely maintain cash withdrawal limits (currently about $460 per week) until fresh money arrives from Europe, worsening the crisis for Greeks. Questions about how to restructure banks may hold up bailout negotiations.[x]

 

[i] https://goo.gl/vFCeR8, http://i.imgur.com/Ox1Ma1t.png

[ii] http://www.businessinsider.com/why-blame-china-for-low-commodity-prices-2015-7

[iii] http://www.zacksim.com/mitch-zacks-commentary-individual-investors/item/526-the-great-fall-of-china

[iv] http://www.zacks.com/commentary/51730/an-uninspiring-earnings-picture

[v] http://www.zacks.com/commentary/51730/an-uninspiring-earnings-picture

[vi] http://www.foxbusiness.com/economy-policy/2015/07/24/week-ahead-fomc-meeting-gdp-and-more-earnings/?intcmp=bigtopmarketfeatures

[vii] http://www.foxbusiness.com/economy-policy/2015/07/24/new-home-sales-unexpectedly-drop-to-seven-month-low-in-june/

[viii] http://www.foxbusiness.com/economy-policy/2015/07/22/existing-home-sales-soar-in-june-surpass-views/

[ix] http://www.foxbusiness.com/economy-policy/2015/07/23/weekly-jobless-claims-lowest-since-173/?intcmp=trending

[x] http://www.foxbusiness.com/economy-policy/2015/07/24/new-home-sales-unexpectedly-drop-to-seven-month-low-in-june/

Stocks Rise on Earnings & Greece Weekly Update – July 20, 2015

Image courtesy of FreeDigitalPhotos.net/jscreationzs

Image courtesy of FreeDigitalPhotos.net/jscreationzs

Stocks surged in an action-packed week, giving the NASDAQ two record closes in a row. For the week, the S&P 500 gained 2.41%, the Dow rose 1.84%, and the NASDAQ soared 4.25%.1

Investors around the world breathed a sigh of relief when EU negotiators finally reached a deal on Greece after weeks of brinksmanship. However, all is not won yet since the deal must pass several Eurozone parliaments next and Greece must apply for a new International Monetary Fund program.2 But, the European Central Bank approved more emergency relief and Greek banks are due to reopen this week.3 Will this new bailout resolve all of Greece’s issues? Certainly not. In fact, we may see new acts in the Greek drama if a snap general election is called this fall or if the IMF refuses to support the deal.4 However, Europe avoided a painful Greek exit and Greece has stepped back from the brink (for now).

On the U.S. side, earnings season really got going last week; despite some outsized performance from a few companies, earnings have gotten off to a lukewarm start, with early results suggesting that revenues may be weaker than what we saw in the first quarter. However, financials are showing strength and some standouts in the tech sector drove the NASDAQ to new record closes.5 Shares from technology giant Google (GOOGL) skyrocketed on strong earnings, giving the stock the biggest one-day rally in history.6

In other news, Federal Reserve Chair Janet Yellen testified before House and Senate committees last week, reiterating the Fed’s commitment to raising rates later this year. Though Yellen is comfortable with the improvement shown by the labor market, she wants to be cautious about the timing of interest rate hikes to avoid stalling the economic recovery.7

Looking ahead, earnings season will continue heating up this week, giving analysts piles of new reports to digest. Investors will also take a look at more housing data to gauge how the sector looks this quarter. Though summer is often a sleepy time for markets, recent events are keeping traders close to home and we may see more volatility in the coming weeks.

 ECONOMIC CALENDAR:

Wednesday: Existing Home Sales, EIA Petroleum Status Report

Thursday: Jobless Claims

Friday: PMI Manufacturing Index Flash, New Home Sales

072015

HEADLINES:

Jobless claims fall more than expected. After three weeks of increases, the number of Americans filing new claims for unemployment benefits fell. Summer jobs data tends to be volatile, but the drop is a sign of health for the labor market.8

Inflation rises in June. The cost of consumer goods rose for a fifth straight month in June, driven upward by rising gasoline and other costs. This increase supports the Federal Reserve’s plan to raise interest rates this year.9

Housing starts rebound in June. Groundbreaking on new homes increased by 9.8% last month and new permits rose, boosting expectations of a housing market resurgence this year.10

Retail sales decline. U.S. retail sales unexpectedly slipped last month as Americans cut back on major purchases like autos and home goods. Though the decline could be seasonal, it raises worries that the economy might be lagging.11

Why Are Greece and China Worries Fading? Weekly Update – July 13, 2015

Image courtesy of freedigitalphotos.net/Jeroen van Oostrom

Image courtesy of freedigitalphotos.net/Jeroen van Oostrom

Markets finally broke the losing streak, closing up for the week as worries about Greece and China faded. For the week, the S&P 500 gained 0.88%, the Dow rose 1.11%, and the NASDAQ grew 0.69%.1

Though a deal with Greece wasn’t reached on Sunday, both sides of the debt overhaul debate appear committed to finding a solution. Top-level officials from around Europe met to put together a deal that would be acceptable to creditors as well as Greece’s wary parliament. With Greek banks shut since June 28 and unlikely to reopen without additional funds, damage is already being done to the Greek economy.2  As of Monday morning, an “Agreement” was finally reached between the two sides; now, attention turns to Greek’s parliament, which must ratify the deal.3

China’s stock market, which has been experiencing a bear market correction, stabilized last week. Is the free-fall over? Hard to say, but we’re not worried. China’s stock market and investing culture is immature, and the recent 30% drop in the Shanghai Composite Index came after a run-up of 150%.4 Many analysts felt that Chinese markets were frothy and overpriced, so the correction isn’t unexpected. However, the stock meltdown does lower the expectation that China’s economy will reignite global growth.5

On the domestic side, the largest stock exchange in the U.S. experienced an outage last week that caused some to worry about the effects of software on markets. The technical fault that caused the New York Stock Exchange to halt trading for four hours on Wednesday gave investors pause but didn’t result in too much disruption to U.S. equity markets because orders were routed through other exchanges. While rumors of a malicious attack flourished, NYSE officials claimed a software glitch was to blame.6

In today’s software-reliant world, technical faults can and do happen. While other institutional traders who measure positions in microseconds can suffer serious losses when orders don’t go through in time, long-term investors aren’t usually affected by small glitches. Why? When you’re investing for long-term time horizons, the timing of individual trades doesn’t matter as much, and little ripples in the market generally won’t affect your long-term financial picture.

In the week ahead, Federal Reserve Chair Janet Yellen will be speaking about monetary policy to the House and Senate. Remarks that Yellen made on Friday suggest that she will probably reiterate the Fed’s intention to raise rates later this year as long as economic activity continues apace.7 Earnings season will ramp up with many banks reporting this week as well. We’ll have more for you on earnings next week.

ECONOMIC CALENDAR:

 Monday: Treasury Budget

Tuesday: Retail Sales, Business Inventories

Wednesday: PPI-FD, Empire State Mfg. Survey, Industrial Production, Janet Yellen Speaks 10:00 AM ET, EIA Petroleum Status Report, Beige Book

Thursday: Jobless Claims, Philadelphia Fed Business Outlook Survey, Housing Market Index, Janet Yellen Speaks 10:00 AM ET

Friday: Consumer Price Index, Housing Starts, Consumer Sentiment

7-13-15

HEADLINES:

Jobless claims rise to highest level since February. The number of Americans filing new claims for jobless benefits rose last week, though underlying trends remain stable. Seasonal factors may be to blame.8

Job openings soar. The number of available jobs rose again in May, showing that the economy had 5.4 million jobs to offer. Despite the increase, hiring remained flat, indicating that employers may be having trouble finding jobseekers with the right skills.9

Fed meeting minutes shows split. Meeting minutes from the June Federal Open Market Committee meeting show that economists were split, with some ready to vote for a rate increase. However, uncertainty around global risks won out, and officials chose to wait for more information.10

Consumer confidence rises more than expected in June. A gauge of how optimistic Americans feel about their economic prospects soared last month, stoking hopes that spending may boost economic growth.11

International Monetary Fund trims global growth expectations. Citing weaker-than-expected economic activity, weak inflation, and other factors, the IMF lowered its global growth projection to 3.3% from 3.5%.12

Hixon Zuercher July 2015 Monthly Market Update